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DeFi on Bitcoin: Jack Dorsey says Square’s new division will make it happen
July 16, 1.45AM UTC: Updated with additional details
Square CEO Jack Dorsey has revealed that Square is building a new division that will focus on building decentralized finance (DeFi) services that utilize the Bitcoin network.
Dorsey made the announcement via Twitter earlier on Friday and revealed that Square’s new division will be building an “open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services. Our primary focus is Bitcoin.”
Like our new #Bitcoin hardware wallet, we’re going to do this completely in the open. Open roadmap, open development, and open source. @brockm is leading and building this team, and we have some ideas around the initial platform primitives we want to build. — jack (@jack) July 15, 2021
Dorsey named engineer Mike Brock as the head of the division, who previously led a development team that was working on integrating Bitcoin features for the Cash App back in 2018. Brock has experience with open-source projects through his work with enterprise open-source solutions provider Red Hat Inc.
On a personal note, I just want to say that I am super excited to return to the world of open source. I cut my professional teeth in open source at @RedHat and excited to prove to the world (again) that great businesses can be built atop of free and open software. — Mike Brock (@brockm) July 15, 2021
A firm of Square’s stature working to make easy-to-use DeFi services on Bitcoin could potentially ramp up adoption and provide greater competition to Ethereum-based DeFi.
The Bitcoin network currently does not have smart contract capability, which makes it difficult to compete with Ethereum-based DeFi and its interoperable “Money Legos.” Decentralized finance on Bitcoin relies on additional infrastructures such as bridges and sidechains to initiate smart contracts.
According to data from Defi Llama, Ethereum dominates top 100 DeFi platforms in terms of locked value (TVL), with Aave topping the list with $9.09 billion in TVL. Binance also provides competition with platforms such as the eighth-ranked PancakeSwap, which has $3.76 billion in TVL.
In comparison, the highest-ranked Bitcoin-based project on Defi Llama is the Lightning Network, which ranks at 103 with a TVL of $58.7 million. However, TVL may not be the best way to measure the utility of the Lightning Network.
DeFi on Ethereum has exploded in 2021, and according to Data from Dune Analytics, the total DeFi user base (as measured in terms of unique addresses) has grown from 1.1 million at the start of January to around 3 million in July.
Days from 0 to 1m unique addresses pinging DeFi: 1,080
Days from 1m to 2m unique addresses pinging DeFi: 143
Days from 2m to 3m unique addresses pinging DeFi: 79
Dune query h/t @richardchen39 pic.twitter.com/8imKOZKQ3V — Matt Casto (@mcasto_) July 12, 2021
Related: Pomp sparks debate: Has Bitcoin DeFi project Sovryn really overtaken Uniswap v3 by TVL?
Along with Square’s latest project, another factor that could aid the adoption of Bitcoin-based DeFi is the Taproot upgrade slated for mid-November.
Cointelegraph reported on June 26 that the upgrade will reportedly open the door to Bitcoin smart contracts.
Square’s new division adds to its business lines that include Cash App, Square Seller and the Tidal streaming service — which Dorsey also recently teased that would have potential blockchain tech integrations such as smart contacts and nonfungible tokens.
The Bitcoin DeFi announcement follows up from earlier this month when Dorsey took to Twitter to announce that Square will be launching its own Bitcoin hardware wallet to provide assisted custody to make the process easier for mainstream users.
Square to launch bitcoin DeFi platform, CEO Jack Dorsey says
Jodie Gunzberg, CoinDesk Indexes Managing Director joins the Yahoo Finance Live panel to discuss the latest as Jack Dorsey says Square will launch bitcoin DeFi platform.
Video Transcript
ZACK GUZMAN: Well, Bitcoin continues to hold above that key $30,000 level. And it’s getting a boost yet again from one of its big fans, Jack Dorsey, CEO of Square and Twitter– taking to Twitter here to announce that Square is creating a new business focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services.
In his words, primary focus is Bitcoin. Its name is TBD, and it follows his announcement at Bitcoin 2021 in Miami that Square was already going to be working on a wallet in the Bitcoin space. Jack Dorsey doubling down there. For more on that, I want to bring on Jodie Gunzberg, CoinDesk Index’s Managing Director here joins the show. Jodie, appreciate you taking the time here to chat.
I mean, we’ve talked about catalysts in the Bitcoin space– Bank of America, as you guys reported today, approving Bitcoin futures trading for some clients. And we can get into that. But what does maybe the Square news say about not only Jack Dorsey’s commitment to Bitcoin, but also the potential to build DeFi applications on top of it?
JODIE GUNZBERG: Yeah, this news to focus on the fire services on Bitcoin supports the case for even more adoption as it aims to provide new ways to access the financial services that are typically like trading, or borrowing and lending, insurance products, savings products. And the goal is really to make it easier to create these non-custodial, permissionless, and decentralized financial services.
So along with Square’s latest project, another factor that could aid the adoption of Bitcoin-based DeFi is the Taproot upgrade that’s slated for mid-November. And historically, the Bitcoin blockchain has been considered slower and less efficient than its Ethereum counterpart. So this [INAUDIBLE] to make it easy to use DeFi services on Bitcoin could ramp up adoption and provide greater competition to the Ethereum-based DeFi.
Story continues
ZACK GUZMAN: Yeah, Jack Dorsey’s always seemed hesitant to really embrace Ethereum and what’s being built there in the traditional DeFi outlets, but focusing in on doing so on Bitcoin. And when we talk about Bitcoin, that Bank of America news, as CoinDesk reported here, adding futures trading– I mean, how important is that when it comes to the other big catalysts we’ve been talking about, and potential institutional excitement around it? I mean, how important is that move from Bank of America?
JODIE GUNZBERG: I think it’s huge. And this is one of the key signs of success for any emerging asset class is this institutional adoption. The major financial institutions have approved investment in Bitcoin products. And just the news today that Bank of America approved the use of Bitcoin’s futures trading is meaningful, not only for the ability of clients to use Bitcoin to speculate, but to hedge.
And once derivatives markets develop to allow hedging, it’s an essential piece of insurance that enables investors to participate in the market and manage their risk. So the deeper liquidity allows more products to be offered and widely distributed. And the fact that the CME group, that’s the Chicago Mercantile Exchange, took the leading spot on the list of Bitcoin futures trading platform also shows a continued rise in the institutional participation.
ZACK GUZMAN: Yeah, we’ve seen a few number of those traditional Wall Street firms adding back their crypto desks, and now this is well– very interesting to see it all play out. But, Jodie Gunzberg, CoinDesk Index’s Managing Director, appreciate you hopping on to chat that with us. Have a great weekend.